What if the Postal Service runs out of money?

We've said it before, but we'll say it again: The U.S. Postal Service is teetering on the brink of financial collapse and is very close to running out of money.

It's fate appeared sealed on Tuesday when Congress decided not to give USPS about $4 billion in financial relief as part of the temporary spending measure it will pass before the recess.

Lawmakers last year wrote language into the bill that allows the mail agency to pay less than the $5.5 billion it's required to pay to the government by law to prefund retiree health benefits. With declining mail volume and labor-intensive expenses, the Postal Service has suffered billions of dollars in losses the last two years and is expected on Friday to announce the loss of billions more.

So what does this mean for mail customers only concerned about sending and receiving mail? It means the possibility of delayed mail deliveries if the Postal Service runs low on cash and has to furlough workers. It also means serious damage to the financial reputation of the nation's second largest employer, because if USPS can't pay $5.5 billion payment to the government, who can it pay?

Postmaster General John E. Potter canceled a meeting scheduled today with reporters and is huddling with aides as he determines what to do. Conversations with several people in the know suggest he has two options: Pay the $5.5 billion or don't pay it. Either way, the Postal Service is in a bad place.

"While it appears that the continuing resolution will not include USPS funding, service will not be compromised while the Administration works with Congress and USPS to ensure that they have the tools and authorities necessary to remain viable well into the future," the Office of Management and Budget said Tuesday. Administration officials are discussing with Potter and his aides what portion, if not all of the payment can be made by the close of the fiscal year on Thursday, OMB said.

"We are perilously close to running out of cash in October or November," Potter told me during an April interview.

"Ideally what you'd like to do in the Postal Service is have access to about $5 to $6 billion in cash, whether that's borrowing ability or cash on the books," Potter said. "And that's basically two payrolls. That's not a lot of breathing room."

Strong mail volume this month might add enough revenue to justify making the $5.5 billion payment, sources said. But that still leaves about a half payrolls' worth of money in the bank -- about $1.2 billion. Any good financial adviser will tell you that's much too little for an organization that employs more than 500,000 people. A private company of similar size would go bankrupt.

The Postal Service could also tap a $15 billion line of borrowing from the U.S. Treasury -- but it's used much of that money already and the credit runs out next year.

There's no strong penalty against USPS if it's unable to make the $5.5 billion payment -- except embarrassment. Lawmakers would likely force Potter to Capitol Hill to explain why he couldn't make the payment and would likely order him to make drastic operational costs. Creditors and other contractors would get nervous and could stop doing business with USPS. Even if they don't pay the money, the organization is still operating with very little money in the bank.

"I think this entire situation puts more pressure on the Postal Service and pressure on the legislators to address the issue comprehensively," said Tony Conway, executive director of the Alliance of Nonprofit Mailers.

Indeed this week's moves signal Congress will act in some way to fix the Postal Service once and for all -- but only after the midterm elections. Lawmakers openly admit they don't want to toil with the possibility of ending Saturday mail deliveries or closing post offices in an election year.

What do you think? Should they pay or not? What can the Postal Service do to save money? Is it time to privatize or should the government do more to manage the mail?

Leave your thoughts in the comments section below

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There is an old saying that the USPS loses a little bit of money on every sale, but makes it all up in volume! There is truth in those words, except the making it up part. Guess who is at fault for the lack of profitability in the USPS. Yup..its our old buddies in the US Congress. Congress will not allow the USPS to sell its services at prices where it can make a profit! Why??? Because if the USPS had to raise its prices to sell stamps and other postal services at price points to make a profit, the US economy would take such a hit, it would make Obamacare and Cap & Trade look like a Sunday picnic. The only solutions viable in this economy are to either cut services and downsize OR have the US Gov take back total ownership of the USPS and absorb all losses (i.e., hide all the losses). Neither is satisfying!

Of course USPS should pay. If they "don't make payroll" so be it. Let's call Potter's bluff. On the other side privatization would only serve to further fragment the country and the seeds of our "united" states bound by the Constitutional, founding fathers, ideal will wither away. The "universal service" obligation of the Postal Service is not comparable to Fed Ex or UPS. It binds this country together like no private entity could/would ever do.

A recent OIG report shows that the Postal Service hasn't even considered reducing its cumbersome and costly regional areas and districts. 8 Areas and 74 districts???

Yet they want to close Post Offices in rural communities that they admit would only produce a 7/10 of 1 percent savings, while the cost to the country would be "priceless".

Make REAL reform and change within, rather than piecemeal and subversive strategic decisions to appeal to those who would seek to profit from the USPS misfortunes. Eliminate and reduce postal "Districts" and show they are serious about change.

Lastly, lets end trying to compare the USPS to private companies. Those (supposed insiders) that do only show either their true ignorance of the place the Postal Service has in American society or they expose there own ideological agenda.

My understanding is that a big part of USPS's fiscal shortfall is a law that Congress passed sometime around 2005 that mandated the pre-payment of retiree health benefits by USPS. This change combined with a drop in mail volume are what have largely done USPS in. They probably need to restructure this retiree health benefits system as well as cut services, perhaps by changing to 5-day delivery.

We've said it before but we'll say it again. Ed O'Keefe never has more than a shallow understanding of the topics he addresses. The reason that USPS is currently short of cash is that the government has soaked them for $50 to $75 billion in pension overpayments and is continuing to soak them for around $5 billion per year in retiree health benefit prepayments. The problem, despite Mr. O'Keefe's beliefs, is that Congress has been using USPS as a cash cow and is reluctant to stop that practice. USPS can trim some fat, close some offices (if Congress would allow that to happen), reduce delivery days (if Congress would allow that to happen) or take other cost-saving measures, but none of them will work. The only solution is for Congress to keep their hands out of USPS' revenue.

Sadly, the pink gorilla in the room, ie the multiple District and Area management offices, is the problem, one that the OIG finally addressed this past week. Rather than continuing to cut our very service, which has cost us many customers, we should indeed bite the bullet and eliminate all these multiple layers of those who do nothing to move the mail. Billions of dollars could be saved without these micromanagers in salaries, real estate and travel expenses. Let Headquarters communicate directly with us postmasters, after all, we were hired to be able to run our own office. Getting the constant micromanaging off our backs would do wonders for workplace morale, also.

I would opt to tell Congress to stop funding their pet projects and stop following this interventionalist mentality in foreign affairs and aid. The US budget is spread so thin because of foreign affairs, we cannot properly manage our domestic affairs and obligations to the US population. We have over 700 military bases in foreign--we shuffle billions of dollars around to foreign nations--allies and enemies/directly and indirectly--how bout we bring it all back to the US until we can get our heads out of are a$$e$ and get this country back in line.

"Lawmakers would likely force Potter to Capitol Hill to explain why he couldn't make the payment and would likely order him to make drastic operational costs."

Doubtful that will happen. What are they going to say? Close Post Offices and Plants - sure, as long as it isn't in my district. Here’s an original thought: Stop Saturday delivery – oh that’s right, you already suggested that – we’ll get back to you. Really raise stamp prices? Senator Collins says that can only happen when the country has been attacked.

In recent days, the Post has carried articles from politicians upset at the Postal Service for trying to close unprofitable post offices or consoldate processing centers for efficiency.

Congress requires the Postal Service to subsidize newspapers and magazines (who otherwise might have to pay what it costs to delivery them. Non-profits (gasp) might also have to pay instead of freeloading.

Congress requires the Postal Service to provide universal services, even where it is very expensive to do so - and forbids it from imposing surcharges like UPS or FedEx (who raise their rates every year, give discounts to their biggest customers, and impose fuel surcharges whenever necessary).

Congress reqjuires the Postal Service to pre-fund its retiree health care costs - the only public or private organization that is required to do so. This is the largest single reason the USPS is going broke.

Congress makes the Postal Service pay for its regulator (the PRC), the OIG, and the law enforcement agency, the Postal Inspection Service - another couple of hundred million dollars.

Congress has tradionally favored the postal unions - who have a very large PAC and are very aggressive in using it. The Postal Service is prohibited from lobbying.

Although the Postal Service has tried to pay competitve rates for some private sector expertise (and got caught and is being punished for it), it generally is not able to afford to hire the multimillion dollar plus geniuses from the private sector (who always do better than government workers, right, Enron and AIG fans?).

The Postal Service has been forced to overpay its pension plan (thereby reducing the federal deficit) by more than $50 billion.

The Postal Service is forbidden from diversification to generate new revenue to support its growing public/universal service responsibilities.

Well, there are several issues here that are not true, the USPS serves great areas of the country outside of major cities, they handle the mailing of medicines for veterans and also legal documents for business. Regardless the current problems were caused mainly by the pre-funding requirement imposed by the previous COngress and the recession caused by the previous administration which excellerated a reduction in mail volumn and lost business. Currently a knot head Senator from South Carolina (Senator Demented) has threatened to "shut down" the government if "they" don't kiss his body parts. This nonsense is all about poor government and nothing else. Running a country or an agency requires taxes just like paying for sewers, cops and firefighters. The real issue is that many jobs are gone and not coming back because of free trade agreements and consumer debt load. The use of scared people to try and whine about policies that you do not like is sad and wrong. If the country is to be placed on a sound footing folks need to vote for the party they think can do the job and than live with the consequences. We shall see.

I am really irritate at the idea of the USPS cutting service days or raising rates! Why? Because I am a small business that relies heavily on them to get my customers their bills and receive payments.

I'm sorry to tell you that not everyone pays online. I live and work in rural areas where some people still have dial up or hardly know how to turn on a computer. Just because you do everything online does not mean everyone else does.

Also, not all businesses want to accept credit cards anyway. Credit card processing costs us hundreds of dollars a month. When you use your debit or credit card at a business, the business pays for your discounts or cash back that your credit card company offers you. The card company does not pay a penny of it. Plus they charge us to process the card on top of it. I have paid as much as 40% of the charge in fees to the credit card company. The average we pay is 2-5% of each sale. But the high rewards cards cost as as much as your rewards. That is certainly no reward for a small business!! This is certainly money I would like to keep in my pocket to feed my family with.

Because of this, I way prefer for my customers to pay me by check. I can actually be a lot more profitable that way. If the USPS cuts service, that delays me getting paid. Also, if you are still a person that pays your bills by check through the mail, think of the late fees you would get if your check doesn't make it on time because of the service days getting cut.

Not just junk mail senders benefit from the USPS. ALL small businesses benefit and not all businesses send junk mail. However, we do need to be able to market to potential customers. Sorry, but email is not very effective due to the delete button. I don't look at any junk email but I will look through printed materials I receive in my mail box.

Don't get me wrong, I do alot of business with my customers through email too but I can't count on it. I can't count the times that my customer accidentally deleted a contract that I emailed them. I can count on the paperwork getting to them through the mail.

It would be really nice if people that make comments were able to think about anyone but themselves and their needs. Americans have a huge problem with "if it doesn't affect me, I don't care". That's sad!!

You might have the USPS stop giving all Congressional officials free mailing privileges. Those junk newsletters from your Congressman do cost money not only to print but also mail.

Second as a retailer the USPS is the worst organized and the least able to meet the needs of my business. Can't even get a Next Day Package picked up and back to their branch on time. With expedited services being their biggest money makers for USPS too. So we switched to Fedex and have never been happier with the service. The USPS is the worst run company. Why would anyone expect a govt bureaucracy to be able to efficiently manage a business?

"You might have the USPS stop giving all Congressional officials free mailing privileges. Those junk newsletters from your Congressman do cost money not only to print but also mail."

You do realize that it is Congress that makes the USPS deliver "Franked" mail, not the other way around? Apparently you don't. Franked mail has been around since the days of the Continental Congress. I doubt very seriously if it's going anywhere anytime soon.

I know a couple of PO retirees and wow they make almost as much as they did when they were working...but I don't know if they get social security(which will be gone for my kids unless something is done)
We need to relook at how high pension benefits are and try cutting for the future...Federal pensions are far superior to state pensions even. Government is never helpful to any business that expects to make money..There are some Federal beurocracies that do nothing but get money from the govt and have pitiful results,a la the Education Dept, and Fannie Mae Freddie Mac. I think the Postal Dept is a great service with hard working and friendly people.. Cut off some of the fat cats at the top

pecat444 USPS pensions, under FERS, are 1 percent per year worked, of the average of your 3 highest consecutive years salary. In other words, if you managed to work for 33 years, you will get 33% of your salary as a pension. Doesn't sound that extravagant to me.

We're always getting supposed lessons from the anti-government types urging Congress to close down all non-Constutional Government functions. On this particular story I have only one remark in that regard:

"The Congress shall have Power ...To establish Post Offices and post Roads"

Where does all the money the USPS that they are putting into these retirement healthcare funds go? I would like to see accountability wonder if the government is using the postal service as a cash cow. We haven't been paid a penny for congresses mailings in like over a decade wonder how many millions the Government owes us for that lol. To those who say privatize privatize privatize i work for the USPS i can handle it just hope when a stamp goes to a $1.25 you can.

Privatize ????? Sorry, idiots, but NOBODY WANTS US...............get that through your stupid heads...........Unlike your examples, FedEx, and UPS, WE HAVE TO DELIVER EVERY HOUSE - EVERY DAY. If UPS and FedEx had to do that, they would be broke as well. And as far as the "bloated wages and benefits" of the USPS employees, UPS workers make more than I do, and they are in the Teamsters Union. And their prices are no bargain, either. Why no call to get rid of their union???
I know it hard, but next time don't reveal your idiocy to the world by commenting on something you know NOTHING about.

They can start by raising the price of junk mail. Since they're sending mail maybe 1% of us actually want, the least these snail mail spammers can do is pay the same rate the rest of us would have to.

Then raise the rates a nickel if necessary. We're still one of the cheapest postal services in the world and I've found mailing packages is cheaper via USPS than FedEX or UPS. UPS and Fedex had no trouble implementing "fuel surcharges" and the like the instant gas prices went up. Fuel prices have returned but the surcharge never went away. The private companies had to raise their prices, USPS should be able to as well.

About 20 years ago, officials at the post office should have done the following:

1. Set up massive email servers.

2. Configured accounts for every STREET address they have in their databases. Like:
(555ELMSt24572@PostOffice.gov)

(Street Number, Street Name, Zip Code)

3. Contacted people who live at that address, via snail mail, and provide them the password for the account.

4. Create online forms for address registration, using the same criteria you use now.

5. Create online forms for address changes, using the same criteria you use now.

Then give away email for free to registered heads of household. One day, email is going to cost money...yes, it's free today, I know. But one day, when it actually begins to cost per transaction, you have laid the framework for the largest email profit base on the planet.

So for 20 years, you are in a losing business (just as you are now) as you transition out of the snail mail to electronic...but then when free email goes the way of the dinosaurs, you become one of the most profitable branches of the US government.

OPM (Office of Personnel Management) overcharged the Postal Service $75 billion. Congress can authorize the return of this money. When the money is returned, the Post Office will be in the black. You can blame OPM for the overcharge, or blame Congress for not returning the money, but don't blame the Postal Service... they were not the reason for this financial mess.

As usual the lies and half truths abound. I wish someone (the author) would really do their research before they go and slam the USPS. The scarrey thing is Congressman Issa is in a position of power yet we don't know what his hidden adjenda really is. Who is backing him and how much money he will make if the Postal Service is privatized. If the GOP would get off their sorry rear ends and do something instead of just saying no maybe the business of the country could get done. As to the Postal Service financial problem. Simply have the Congress of the United States authorize the repayment of the pension overpayment that has been going on since the Nixon administration. That alone, $50-$75 BILLION, would do away with all of the excuses to destroy the USPS. The Board of Governors is stacked with people who probably would have a financial benefit if the USPS was privitized. Why don't they work for the service instead of against it. This issue is being used to whip up the political frenzy of this Novembers elections pure and simple. Just fix the system dont destroy it and reinvent it!

Privatize or take them back. Lead or get out of the way, congress. If they are federal workers, then they s/have comparable benefits. CSRS went out a long time ago, they s/be on FERS. Health benefits s/be the same & paid by the gov & the employee. Congress needs to do their OWN job and STOP calling everybody on the carpet, then not changing their own practices. I agree completely w/BennyFranklin! If the Republicans would put plans forward to either help or be better than what's there; if the the whole congress would stop stealing from every pot of money that crosses their path; if those at the top could live morally and ethically; and to do that we need TERM LIMITS!

Let's privatize the entire federal government. Much of the government is already run by contractors. Make the government into a profit-making enterprise and eliminate all federal taxes. The Office of the President and Member of Congress should be auctioned off to the highest bidders. Hmmm, uh, I think it already works that way.

And the no longer recent Supreme Court decision that made corporations into natural-born or naturalized citizens, i.e., people, who just happen to have some spare change of millions or billions of dollars allows them to with impunity more openly buy Members of Congress than they already do.

If anyone with any Postal management power is reading this, please, PLEASE look at the Hamilton Grange Station New York Post Office. Everyone in the neighborhood hates it; A COLLEGE STUDENT COULD RUN THE PLACE MORE EFFICIENTLY. But don't take my word for it. Check out the reviews on Google Maps.

If that office is in any way characteristic of Postal Service, then there's a billion dollars waiting to be saved, right there.

The employees working there look like they've experienced the Dementor's Kiss.

I may be the only one who thinks this way (instead of just clammoring in with anti-government rhetoric...) but I think the US Postal Service does an incredible job. Who else gets your letter from door to door anywhere in the US and it's territories for 44c? In fact the price of postage is TOO LOW and is kept that way by congressional oversight. Any other business would be charging 10x that.

To solve the money problem, they could do two things quite easily. Raise the rate to 50 to 75c each piece...and make everyone pay the same rate (i.e. no free lunch for junk mail that no one wants and wastes paper anyway.) Bet they'd be running with a great profit in 1 year.

Congress always gets in the way with its special interests. Congress stole the Social Security funds and said there was a crisis so the fund's donors must be punished. Congress stole the pension funds of the USPS and said the postal workers must be punished. I suggest we steal all of the benefits from each member of Congress and let them fend for themselves and see how they like it.
My Party? No Second Terms For Anyone, Ever Who Becomes A Member Of Congress Party. Let them go back home and earn an honest living. Please send me cards and letters. I dislike e-mail.

the usps has never come into the 21st century let alone the 20th century. it is an organization of inconvenience. not open 7 days a week, no drive up windows, very little online help, the worst instore help( like the dmv), lousy open hours etc. they should have been online years ago.they could have had online greeting cards for birthdays, anniversarys, etc. they pay employees way too much and have way too generous perks. just another antiquated government organization.

Some of the commenters here appear to think that written correspondence would never reach an addressed party living "outside a major city" if it was not for the USPS. That is currently the case *only* because it is illegal for any person or group to deliver "first class mail" except the USPS - couriers services have found certain "loop holes" in some circumstances but the charges for their services are not inexpensive.

Eliminate the government monopoly on delivery of "first class mail", just as was done years ago with parcels, and entrepreneurs will come forth to fill the needs of senders in various ways at a variety of price levels. (Don't try to second guess ingenuity. Who would have guessed at the popularity of email 25 years ago?)

It is the US government that keeps its citizens dependent on various government agencies by declaring that anyone else providing the service - mail delivery being discussed here - is violating a monopoly law. Numerous products and services can only be offered and purchased between consenting parties *if* the government has decreed that enormous numbers of regulations have been met, thereby adding to the cost and reducing the availability - but then these are just what some producers want: mercantalism/cronycapitalism.

So to answer the question: "What if the Postal Service runs out of money?" Let it! And plan for its shut down now to take effect in some stated short time period! Remove the government monopoly restrictions on certain mail delivery! How about 2012 start with government out of the delivery of mail?

I retired from the USPS back in 2004. When I
began my career in 1967, we were a part of the Presidents' Cabinet. I worked long and hard hours but the morale going on then was just like one big happy family. When the switch was made in the 1980's, to become semi-private it gradually developed into a dog eat dog environment. I say put the post office back into the presidents' cabinet and than we can tackle some real problems.

First of all, the USPS is a necessary service. Despite a number of postings that say just "email" it, that is NOT a reasonable solution. There are many poor and elderly who do not have access to reliable internet access. A significant number of private industry jobs are dependent on so-called "junk mail" which I promptly recycle but it is mailed at reduced rate at really does allow the USPS to deliver first class mail at lower rates. A big waste is the "free" franking privilege Congress awarded itself to send BS communications (veiled campaign literature) to the public.
Even with a law change, UPS and Fed-Ex would NOT deliver to all addresses as is required of USPS. Just look at the cheapest delivery option these companies offer. "It ain't cheap".
Cut the levels of bureaucracy in the USPS (complaints about local workers don't get answered anyway) and cut mail service to Monday, Wednesday, Friday and Saturday. Fewer employees needed for delivery would allow sorting and other activities to be done on the other days with less labor. Benefit could be trimmed to more closely match other government workers. USPS is worth saving, just not in it's current form.

Potter is out of touch with the people. He needs to go and the U.S.P.Service needs a major overhaul. Staff are generally rude and incompetent. Always trying to overcharge one with their 'priority' rates when I wnat something at the lowest possible rate.
Second,in my high-rise on the lake front in Chicago it took 5 years with three local & one federal politican and the building management to get rid of the worst postal worker who became "king of withholding and smashing mail". Even the inspector general's office was fustrated. Life time jobs no matter what? Swimming in 'our' pool, using the care wash, leaving mail un attended...the cultutre there needs to change and be more competitive and public friendly.
They can make up the money by being effective and it starts at the top.

"FedEx shipping rates to rise. FedEx (FDX) will increase average FedEx Express shipping rates on U.S. domestic and export services by 3.9%, effective Jan. 3. The full average rate increase of 5.9% will be partially offset by reducing its fuel surcharge. FedEx Freight and less-than-truckload shipment rates will increase by 6.9%, effective Nov. 1. CEO Fred Smith paints an optimistic view, saying the company is "back on track" to reach long-term growth of 10%-15% in EPS and 10%+ in operating margins. But that growth will come mostly from international express shipping, not from the "tepid" U.S. economy. "